GM seeks bankruptcy ruling on its product liability protection

4:18 PM, April 15, 2014

General Motors wants to delay a federal judge in San Francisco from ruling on a class-action case until a bankruptcy judge in New York decides whether the company is shielded from all product liability claims tied to crashes or defects before it exited bankruptcy in July 2009. / Paul Sancya/Associated Press

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WASHINGTON — General Motors wants to delay a federal judge in San Francisco from ruling on a class-action case until a bankruptcy judge in New York decides whether the company is shielded from all product liability claims tied to crashes or defects before it exited bankruptcy in July 2009.

It was believed to be the first time since the recall of 2.6 million cars began in February that GM acknowledged it would ask a federal bankruptcy judge to protect it from claims. In the filing Friday, the company said it would make the request based on protections given “New GM” in 2009.

GM went through a bankruptcy reorganization funded by U.S. taxpayers five years ago that and left most of its product iability with the old company, which mainly consisted of shuttered factories some of which have been sold. GM’s critics have argued it should bear responsibility for a defect linked to 13 deaths and 32 crashes in North America.

It was not immediately clear how the request -- which GM said would be filed “soon” in U.S. Bankruptcy Court in New York -- would affect its plans, if any, to compensate families impacted by the defective Chevrolet Cobalts, Saturn Ions and similar cars. Two weeks ago, GM CEO Mary Barra announced compensation expert Kenneth Feinberg had been hired to advise the company.

GM officials did not immediately respond to a request for comment from the Free Press.

GM made its plans public in a motion submitted Friday in a proposed class action filed in U.S. District Court in San Francisco. The company asked for a delay in the case until both a bankruptcy judge rules on its request and, separately, a federal panel decides -- most likely after a May 29 hearing in Chicago -- whether to consolidate at least 19 cases across the U.S. linked to the recall.

The company said it would seek an order in bankruptcy court against “plaintiffs in all related actions to cease and desist from further prosecuting against ‘New GM,’ or otherwise pursuing any and all claims barred by the provisions” of the July 2009 bankruptcy reorganization and sale.

In the filing, GM lawyers said the “New GM” assumed the so-called “Glove Box Warranty” to repair “Old GM” products, but that was all. That warranty was limited to a period of three years or 36,000 miles, which ever came first.

The model years affected are largely 2003 through 2010, though it also includes 2011 Chevrolet HHRs.

In the San Francico case, a group of owners of the recalled cars from nine states are arguing that GM knew about the faulty ignition switch and should financially compensate buyers for the reduced value of their cars. Adam Levitt, a director at Grant & Eisenhofer in Chicago who represents the plaintiffs, was not available today to respond to the Free Press.

Since the recall began, it has been known that GM had bankruptcy protection but legal experts have said that shield could be pierced if top officials knew about the liability and kept it from the bankruptcy court in 2009. While there are indications GM knew it had a problem with defection switches going back to preproduction of the Ion in 2001, the company has said it only learned late last year that the switches could inadvertently be jostled out of position, potentially disabling the air bags in the event of a crash.

Also today, U.S. Sen. Richard Blumenthal, D-Conn., kept up the pressure on GM, demanding that Barra provide “clear and accurate information” on when repair parts will be available to all dealers.

Blumenthal said an informal survey of 34 GM dealers in his state indicated that of the 14 dealers responding, 11 said they still haven’t received replacement parts, even though they were supposed to be widely available last week.

“I call on GM to state how many dealerships have received replacement parts necessary for these repairs, and how soon the remaining parts will be delivered,” he said in a letter to Barra. “This information is vital to your customers’ safety – indeed, their lives – in driving your cars.”

Blumenthal has repeatedly called for GM to establish a “victim’s fund” to compensate people injured or who lost relatives in crashes involving the recalled vehiles and he has asked it to tell drivers to park all the vehicles until they are repaired.